The Heritage Foundation ran a contest to see if anyone could come up with better gifts for the Queen than the iPod the Obamas gave her. They divided it into two parts: thoughtful gifts and humorous ones. Some of the thoughtful gifts were truly excellent — Obama’s protocol people should take notes. But one of the facetious gifts was my favorite:

When the housing bubble burst last summer, people started worrying about more than just the values of their homes. Fannie Mae and Freddie Mac collapsed and, in their wake, took down major banks like Bear, Sterns and legendary insurance giants like AIG. If you're an investor, you can recall when these stocks were among those considered to be as close to "sure things" as any investment could be. Their collapse, and the threatened fall of other big banking houses, was and is frightening.

On top of that, the Big Three automakers -GM, Ford, and Chrysler- entered what may well be their death throes. Think about it: three of the biggest symbols of American wealth and power, indeed, of a uniquely American lifestyle, looked like so much fodder for the vultures. Again, scary.

And, of course, our leaders didn't help dispel that sense of impending doom. President Bush proclaimed he had to abandon capitalism to save it. And President Obama has spent the last two months since his inauguration telling us we're in the worst crisis since the Crash of '29 and the Great Depression. (Not to mention the repeated attempts to cast him as a new FDR.)

So, we're moving from the New Crash to the New Great Depression, right? It's 1932 again, isn't it? Time to figure out what to wear to the breadline, eh? Not so fast. You might need a wheelbarrow, instead. If the Telegraph's Martin Hutchinson is right, we should be worried that instead of 1932, it's 1923:

…look at the Weimar government. Suffering from the trauma of defeat in the First World War and the burden of reparations, it was too weak to raise taxes. It ran large budget deficits instead. Interest rates were kept far below the rate of inflation, while money supply expanded rapidly. About half of government expenditure was funded by newly printed money.

The great economist John Maynard Keynes provided an acid comment in 1920. "The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."

In Germany, the result was hyperinflation. By November 1923, the mark was worth one trillionth of its 1914 value. Pay packets were collected in wheelbarrows. Foreign depositors in German banks were wiped out.

Think about how President Obama and the progressive Democrats are spending like drunken sailors on payday: How are they going to pay for it? There are three ways: borrow the money ("Hello, Beijing? I'd like two trillion in take-out money, to go, please. Just charge it."), tax the people until we bleed, or print a lot of new money. That last is the 1923 or "Weimar" option. Think it won't happen? Think again:

The Federal Reserve ramped up its effort to revive the economy, declaring it would buy as much as $300 billion of long-term U.S. Treasury securities in the next few months and hundreds of billions of dollars more in mortgage-backed securities.

The Fed had already cut its benchmark interest-rate target to near zero. Unable to go lower, the central bank now is essentially printing money to raise the supply of credit and thus push down the longer-term rates paid by families and companies on mortgages and other key loans. The impact was immediately felt.

Prices on Treasury debt soared, pushing the yield on 10-year Treasury notes down to 2.53% from above 3% the day before — the largest one-day drop since the aftermath of the 1987 market crash. The rate on a 30-year fixed-rate mortgage for credit-worthy borrowers fell to about 4.75%. But the value of the dollar sank, a reminder of the risk the Fed is running by printing money to give the economy a jolt.

The declining value of the dollar is inflation: as more dollars are pumped into the system to pay for our national spending spree, the value of your money -your paychecks, your savings, the loose change lost in your couch- goes down. A buck just won't buy as much as it did. Some inflation is normal and easily lived with; we've done just that since Reagan and Volcker conquered the beast of 1970's inflation nearly 30 years ago. But government policy can create much worse inflation. If you're like me and lived through the 70s, you know what I mean. While the Journal author calls this "a risk," I think it's guaranteed. The federal government will have to print money to meet the obligations it's taking on, and that means an increasing and increasingly painful rate of inflation.

Back to Hutchinson's article, he thinks Weimar-style hyperinflation may be the greater risk, rather than Depression-era levels of unemployment. I don't know: it's possible President Obama can achieve both. He reminds me (and not just me) of Jimmy Carter, and Carter during his term achieved what many economists had thought impossible, combining a stagnant economy with inflation to create stagflation. It's possible that Obama's new New Deal will stabilize the economy at some high, but "acceptable" level of unemployment, have slow to no growth, and high inflation.

In other words, we could be in for both 1932 and 1923.

I wonder if they allow wheelbarrows in the breadline?

HERE WE GO: the Senate just passed the Obama budget, following approval in the House earlier today, Thursday.